If you plan to claim charitable contributions on your 2021 tax return, make sure you’re ready to prove your donation with substantiated documents. With the Consolidated Appropriations Act, 2021 extending the temporarily suspended limits on charitable contributions through 2021, the IRS has increased its efforts to crack down on taxpayers abusing this tax benefit. It’s watching for taxpayers who are recording large contributions on tax returns this filing season.
Substantiation requirements
Taxpayers taking advantage of the charitable contribution deduction on their 2021 tax return should be aware of the following substantiation requirements outlined by the IRS.
1. Donations of $250 or more
Taxpayers (the donor) are required to obtain and keep a contemporaneous written acknowledgment from the qualifying charity that states:
- the amount of the donation
- whether they received any goods or services in consideration of the donation
- the value of such goods or services
To be contemporaneous, the donor must generally obtain the written acknowledgment no later than the date the donor files the return for the year the contribution is made.
Taxpayers who made a 2021 donation but haven’t received written acknowledgment from the receiving charity are strongly encouraged to obtain this documentation before filing their 2021 return.
2. Cash donations under $250
If a cash gift was made with a check or credit card, a canceled check or bank or credit card statement will usually suffice. If a donor received any form of goods or services for their donation, they must reduce their deduction by its value.
For example, if a donor gives a charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. In this example, the charitable contribution portion of the payment is $60. Even though part of the payment available for the deduction does not exceed $75, charities are still required to provide a written disclosure statement to the donor in case the taxpayer wants to combine multiple donations to meet the deduction threshold.
3. Donated property
Taxpayers who have donated property valued at more than $500 must complete Form 8283 Noncash Charitable Contributions and attach it to their return. Otherwise, the IRS won’t allow the deduction. For property donations valued beyond $5,000, the donor must obtain a qualified appraisal and attach the appraisal summary to their tax return.
Have questions about the documents you need to support your charitable contributions? Let’s talk!